Important change to ‘working from home’ tax deduction

During the pandemic, the ATO provided taxpayers with a shortcut method for claiming work from home expense deductions (given most of us were forced to work from home). In summary, you were able to claim a deduction equal to 80 cents per hour that you worked from home.

Last week, the ATO announced a change that may make claiming this deduction more challenging unless you keep the necessary records. From 1 March 2023, taxpayers must keep a diary for the whole financial year that records the exact hours that they worked from home. Therefore, it is important that you begin keeping these records.

There are two ways you might consider doing this:

  1. Use an electronic tool such as the ATO’s app (myDeductions) to maintain your records.
  2. If you work from home the same day/s each week, ask your employer to write a letter confirming what arrangements existed for the financial year e.g., that you worked from home 2 days per week for the whole financial year which equates to 16 hours per week or 768 hours for the year after allowing for annual leave (obviously your employer will need to review your leave history for the financial year to calculate actual hours).

If you maintain adequate records, you will be able to claim a deduction equal to 67 cents per hour for the 2022/23 financial year.

You don’t have to use the cents-per-hour method to ascertain this deduction. You can use the alternative ‘actual cost’ method, but this method tends to require a lot more record keeping.